Cuomo Vetoes Bill for Revamping System of Reimbursing Hospitals

A fundamental revision in the way hospitals are reimbursed by insurance companies and the government was vetoed today by Governor Cuomo, who said it would have cost New Yorkers $400 million more a year.

The Legislature passed the bill unanimously last month, and the veto set up the potential for a showdown with the Governor.

Key lawmakers, who maintain that the bill would lead to little increased cost to New Yorkers and who are angered at the Governor following this year's dispute on an ethics code, have suggested that the Legislature might consider reconvening to seek to override a veto.

In four years and eight months in office, Mr. Cuomo has never had a veto overridden. Pension Measure Vetoed

In a second veto today, Mr. Cuomo rejected another bill that had been passed unanimously - an increase in pensions for more than 300,000 retired city and state employees. He said the bill contained technical flaws and had been drafted without sufficient consultation with New York City. [ Page B5. ] Mr. Cuomo's decisions came on the final day of the 30 days he is allotted, once the Legislature adjourns, to act on bills. In other action today, the Governor, as expected, signed into law the new ethics code and a measure to allocate $1.25 billion for refurbishing the state's dilapidated court buildings.

The hospital bill has brought intense lobbying of the Cuomo administration for weeks, with hospitals, physicians, insurers and unions urging Mr. Cuomo to sign it. Business groups urged him to veto the bill, arguing that it would lead to businesses paying higher medical-insurance premiums for employees.

Legislation authorizing the current system for reimbursing hospitals expires Dec. 31, and the bill would have established the system to replace it.

Under the bill, as an incentive for hospitals to cut costs, insurance companies and the government would no longer reimburse the hospitals for a patient's care on the basis of the number of days the patient spent in the hospital. Instead, the reimbursement would be based on the type of illness and would be the same regardless of the length of stay.

The Cuomo administration and the Legislature agreed on that change. History of Costs

But they disagreed on how to set the rate for specific cases. The Legislature would have a rate set for each hospital based on that hospital's history of costs. The administration would have the rate set regionally, based on the cost history of a group of hospitals, which would presumably lead to a lower reimbursement level for the more expensive hospitals in the region.

In addition, the Legislature would change the base year for computing hospital costs. It is now 1981, which the administration would like to stay with, adjusting figures for inflation. The Legislature would like to change it to 1985.

The Cuomo administration argues that the bill would have rewarded hospitals that charged too much and penalized those charging lower rates. It maintains, for example, that a hospital that charged inflated rates between 1981 and 1985 would have those rates built into its base, while a hospital that cut rates in that period would not be rewarded for its efforts.

Using projections from experiences with Medicare, the Federal health plan for the elderly, the State Health Department projects the added cost to New Yorkers - which it calls a ''windfall'' for the hospitals - at $400 million a year. 'Too Many Concessions'

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James R. Tallon Jr., the Assembly majority leader and until recently its Health Committee chairman, called the Health Department's figures ''unrealistic.'' Mr. Tallon, a Binghamton Democrat, said an analysis prepared by Blue Cross at the Assembly's request had found costs to New Yorkers would rise negligibly, about three-tenths of 1 percent.

The Assemblyman suggested that the real reason behind the administration's objection was that the Health Commissioner, Dr. David Axelrod, resented the Legislature's exerting influence in the health area and was trying to block it.

''I think the Health Department's objections were not related to the cost of the bill,'' Mr. Tallon said. ''I think they were related to the desire of the Health Department to be free of detailed legislative guidance in the health system.''

If the Legislature does not override the veto, no law will be in effect after Dec. 31 and power to regulate hospital reimbursement will revert to the Health Commissioner. 'Too Early to Say'

Asked if the Legislature would try to override the veto, Mr. Tallon said, ''It's too early to say - I need to read the veto message.'' But he quickly added, ''We made it very clear all along that the reimbursement bill was a very important one and had unanimous support in the Legislature.''

Assembly Speaker Mel Miller said through a spokesman that he wanted to read the veto message and talk to fellow Democrats before deciding what to do. But the morning the legislative session ended, July 11, Mr. Miller, who is from Brooklyn, said he would consider bringing his members back into session if the hospital bill were vetoed.

Since the bill originated in the State Senate, that house must make the initial decision on whether to override the veto. Charles Dumas, a spokesman for the Senate majority leader, Warren M. Anderson, a Binghamton Republican, said Mr. Anderson was on vacation and would have no comment until he returned.

Although the Legislature has never overridden a Cuomo veto, this was viewed as possible on the hospital issue because of the powerful lobbyists who supported the bill, the level of animosity in the Legislature toward the Governor and many legislators' view that the issue is an important contest of power between the executive branch and the Legislature in an area in which lawmakers have been trying to step up their authority. Big Spenders

Cuomo aides acknowledged that the veto was a gamble. But they said that if the Legislature pressed a confrontation, they would fight off overriding of the veto by portraying lawmakers as big spenders intent on giving a windfall to the hospitals.

Today, however, the Governor went out of his way to seek a compromise. He stressed in an interview that he thought there was time for the administration and lawmakers to work together on a bill that could be passed and signed early next year.

A spokesman for the State Health Department, Peter Slocum, said it had begun to draft regulations that would go into effect Jan. 1 if no law was in place by then. But in an apparent effort to head off any overriding of the veto, he said the regulations would not simply impose all the conditions Dr. Axelrod had wanted but failed to get from the Legislature.

Mr. Slocum said the regulations would maintain 1981 as the base year, not change it to 1985 as Dr. Axelrod had wanted. And he said the rules would primarily base reimbursements on each hospital's own history, not on a regional basis.

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A version of this article appears in print on August 12, 1987, on Page A00001 of the National edition with the headline: Cuomo Vetoes Bill for Revamping System of Reimbursing Hospitals. Order Reprints|Today's Paper|Subscribe